Bank Deposits & Real Returns

A quoted annual rate, the effective compounded yield and the inflation-adjusted return answer different questions. Compounding requires that each payment stays invested at the assumed rate. Withdrawal penalties, payment dates and contract terms matter. Real return compares the growth of money with the growth of prices: (1 + nominal return) / (1 + inflation) − 1. Subtracting inflation is only an approximation. A foreign country’s deposit insurance rules do not establish protection for an Iranian deposit.

Worked example (hypothetical)

With a hypothetical 25% nominal gain and 40% inflation, real return is 1.25/1.40 − 1 = −10.7%. A 100 million rial balance grows to 125 million but buys less of the original basket.

Check your understanding

Does monthly payment automatically mean compounding? No: money spent or held elsewhere is not reinvested in that deposit. Check the actual payment and reinvestment rules.

Sources, reviewed 5 October 2026

• IMF: Inflation, Prices on the Rise
• Monetarism: Money Is Where It’s At